Volkswagen Group will invest $1 billion in EV startup Rivian as part of a broad software development deal that could expand to as much as $5 billion.
It’s a boon for Rivian, which has a tough road ahead as it pushes to develop the mass-market R2 SUV. The company’s shares jumped more than 49% in after-hours trading.
But it also gives Volkswagen another option for promoting its own pieces of software — something it has struggled with during this mass shift to electric vehicles.
As part of the agreement, the two companies will create a joint venture to develop and deploy the technology. It will be a 50-50 partnership with co-CEOs, who will report to both Rivian Group and Volkswagen Group. Rivian will share its electrical architecture expertise with VW and is expected to license existing intellectual property rights to the joint venture.
This deal will give Volkswagen access to Rivian’s existing electric architecture and software platform. All Volkswagen Group subsidiaries are included in this deal, which could bring Rivian’s DNA to storied brands such as Porsche and Audi, and even the group’s EV debutant Scout Motors.
It is possible that the consortium will sell its technology to other companies in the future. “But we have a lot to do in the short term,” Rivian founder and CEO RJ Scaringe said on a conference call. “We have a lot of products to work on, and so we’re totally focused on the products in the Rivian portfolio, the Volkswagen Group portfolio, and I would say [we] I couldn’t be more excited for what’s to come.”
Initially, Volkswagen will invest $1 billion in Rivian through an unsecured convertible note that will convert into Rivian common stock once certain regulatory approvals are received. This is expected to happen in the fourth quarter of this year. The German auto giant will then buy another $1 billion of Rivian common stock in 2025 and 2026. The remaining $2 billion will go to the joint venture, split between an initial investment and a loan in 2026.
Scaringe did not say exactly when the two companies began hashing out the idea of a partnership. But he said the conversation started when he met with Volkswagen Group CEO Oliver Blume at the Porsche Experience Center in Atlanta, Georgia — the same state where Rivian plans to build a factory.
“I grew up a huge Porsche fan. I’ve restored classic 356s and own all sorts of interesting products from the Porsche/Volkswagen family, so we immediately realized we have some vehicle interests in common,” he said. “But that quickly led to a serious conversation about saying, how can we look at our collaboration?”
Bloom echoed that sentiment on the call. “From the first moment, there was a very good feeling between us, the same mentality, the same interests. And our business is a people business, and when you understand each other, that’s when you’ll be successful,” he said, adding that Rivian is “very flexible with experience in modern software.”
The news comes just weeks after Rivian began production of the next-generation R1T truck and R1S SUV, an upgrade that reshaped the guts of its vehicles, changing everything from the battery pack and suspension system to the electrical architecture, interior seats and the sensor. pile. Rivian’s new electrical architecture and computing platform has reduced the number of electronic control units (ECUs) used to control the vehicle from 17 different ECUs in its first generation to seven. This new belt architecture allows Rivian to cut more than 1.6 miles of wiring from each vehicle—a weight savings of 44 pounds—and build its vehicles faster.
This new electrical architecture — or what Scaringe describes as a new vehicle topography — is seen internally as a key innovation at Rivian, and one that allows the company to wirelessly update software. The new zone architecture supports Rivian’s software stack, which was also developed and developed in-house. This software stack includes everything related to real-time operating systems (RTOS) that manage the car, such as thermal dynamics, ADAS and safety systems, as well as another layer related to the infotainment system.
Rivian and Tesla both use a zone architecture — which many believe is the basis for what the industry calls software-defined vehicles. Software-defined vehicles also offer automakers the opportunity to add revenue streams through in-car entertainment and services. In 2021, VW Group said the Cariad could generate up to 1.2 trillion euros ($1.4 trillion) in revenue by 2030 through subscriptions and other sales.
VW has long professed a goal of bringing advanced, easy-to-update software to its entire portfolio. But the company, and Cariad’s software unit, have been plagued by delays and executive reshuffles. Last October, VW Group’s board of directors approved the restructuring of Cariad, a move that involved cutting up to 2,000 jobs and further delayed the rollout of VW’s 1.2 software architecture by 16 to 18 months.
The software 1.2. The platform, which was developed for the Porsche Macan EV and Audi Q6 E-Tron, was originally scheduled for completion in 2022. Cariad has moved the launch date several times. VW vehicles today already have software version 1.1 installed. Cariad is also working on a version 2.0, an operating system designed for all VW Group brands. Architecture 2.0 was originally planned for release in 2025.
